Thursday, January 1, 2015

The following is a guest post submitted by Young. In the post, he writes on the subject of passive investing in Index ETF. Read it below:

It has been a while since I submitted a blogpost. 2014 has been a pretty decent year so far even though there were some rough bumps along the way. A little more on POSB Invest Saver, POEMS Share Builders Plan and OCBC Blue Chip Invest Plan,The POSB Invest Saver, POEMS Share Builders Plan and OCBC BCIP are in my opinion, designed to cater to new and younger investors as they can invest from as low as $100 a month.You might be wondering, what can one buy with $100 a month? As described by the relative offers, it is none other than Index ETF’s. For POSB, they offer just 2; ABF Singapore Bond Index Fund and the Nikko AM STI ETF. As for OCBC, they offer similar to POSB, but includes 18 other individual counters like ComfortDelGro, Olam International and Wilmar International. POEMS also gives one the option of investing in 19 other individual counters such as CapitaCommercial Trust, SIA, ST Engineering and the like.However, one thing that may be of interest is that POEMS offers the option to reinvest the dividends you earn back into your Regular Savings Plan. Neither POSB nor OCBC has such an option for now. POSB charges a 1% fee on each transaction which is invested into Nikko AM Singapore STI ETF and 0.5% for the ABF Singapore Bond Index Fund. OCBC however, charges 0.3% of each transaction which invested but has a minimum fee of $5 per counter. Unlike POSB, OCBC also charges 0.3% or $5 whichever is higher when you liquidate or sell your positions.Lastly for POEMS, it depends on the investment amount and how many counters you’re investing. If the total invested amount is less than SGD1000, a flat rate of $6 is charged for 1 or 2 counters. But for 3 or more counters, the fee is a flat rate of $10. If your investment amount is more than $1000, the charge is 0.2% or $10, whichever is higher. I hope I managed to present the above information in a clear and concise manner. Hopefully this will be easier for the younger readers to comprehend and perhaps help them get started! A big event that is coming is none other than the Chinese New Year! Be sure to have fun visiting friends and relatives but at the same time do note to not gamble too much! It is after all your hard earned money!One thing I learnt in the month of December is that one should always be prepared. I did not prepare my funds and hence missed the boat for 2 very popular blue chips namely Keppel Corp and Sembcorp Marine. I feel that one should always be prepared no matter what as no one can predict what will happen in the coming weeks or even tomorrow. To the younger readers who are interested in investing, or would like to learn more about it, do check out the OCBC Blue Chip Invest Plan or the POSB Invest Saver.Lastly, with the recently short terms rallies in some of the local counters in O&G industries, I’d like to urge all to exercise caution! A hearty congratulations to all who took a nice profit this week! May 2015 be better than ever!Happy New Year! My Thoughts:
Investing in Index fund is a good way to grow your money over the long term. I wrote on index fund investing previously in this article: Low Cost index fund investing (Passive Investing)

Index fund investing is also known as passive investing as you can just sign up for the plan and automate it to invest a certain amount on a monthly basis. Over the years, the price of the fund that you invest in will average out because you invest in it no matter when the price is up or down. For example, if you start investing now and the fund price is $3 but when the fund price drops to $2 and you're still investing in it monthly, the price averages out to less than $3. Over the long term when the fund price rises back up to $3 or even higher, you would have made a profit. The key is investing in it for the long term to see the effects of compounded growth.

For the case of Keppel Corp and Sembcorp Marine going down, it is actually an opportunity for those investors who have the capital on standby to deploy. Readers who've read my previous post on my Jakarta trip will know that I had personally invested a small amount in Sembcorp Marine when the price went below $3. This can be an opportunity fund that you set aside to take advantage of this kind of opportunities. Knowing how to allocate our investment capital efficiently can be the main factor to success and failure in investing. For myself, I would never invest all my money at once unless during extreme market pessimism. As what Warren Buffett says: "Be fearful when others are greedy and be greedy when others are fearful".

13 comments:

"However, one thing that may be of interest is that POEMS offers the option to reinvest the dividends you earn back into your Regular Savings Plan. Neither POSB nor OCBC has such an option for now."

I can't remember which bank does it, but there is an option(can be done online as well) to adjust your investment amount. Just adjust the values to factor in the dividends you earned. Might have to do it twice a year. Only drawback is this process isn't automated.

Hi, but for posb invest saver, the investment amount has to be in multiples of $100. So if I am investing $100 per month, meaning dividends would be less than $100, how do I get to reinvest the dividends back?

Yup, the dividends will be less than $100. One way is you can accumulate the dividends first before reinvesting it in multiples of hundreds. If dividends are less than $100, there's no hurry to reinvest it as it won't be a big difference.

What are your thoughts on using SCB to buy etf or stocks for investment? I know the main concern here is that the money will be held in a custodian account instead of your own CDP. Is there a risk of losing your investment money using SCB? Isn't it the same as putting your savings in a bank?

SCB has clarified on their fb page that the closing of its equities business will not affect its retail customers. Not sure how true this is. If you don't mind sharing, which brokerage acc are u currently using for passive investing and which one for buying of normal stocks? And if you were to buy say sembcorp marine, would you buy it in such a way that you cover the min comm of $25 or at an amount which you can afford?

I have about 10 stocks in my portfolio. Some of it are Japanese Reits and business trust like Saizen and croesus. The recent addition was semb marine. The rest you can discover and dig from my blog post. :)

My holding in sembcorp marine has decliend about 40%. I am still holding ut but bave not added to it. I don't intend to add more to it since its really unpredictable. Will invest more into other good stocks and let this company be a small part of my portfolio.

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